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2 September 2003
The Life Insurance Association has warned that many Singaporeans could be left with too little money for their retirement, following cuts to the CPF savings scheme announced last week.
President of the Association, Raymond Kwok is urging Singaporeans not to spend too much on their homes to prevent them falling short of retirement funds.
The Life Insurance Association says most Singaporeans currently spend 80 to 90 percent of their CPF savings to finance their properties.
Mr Kwok said: “A person should only use 10 to 15 percent of their income to fund their housing. Unfortunately in the CPF context we have more fixed assets being accrued from the contribution than liquid assets. In an ideal situation, ignoring the CPF scheme, a retirement scheme should be built up with an average of 18 to 22 percent of person’s income so that the person can retire at two-thirds of his final salary.”
It is widely expected that private home prices will now fall in the near-term, with some shifting to smaller, more affordable accommodation.
October’s 3 percent CPF cut is also expected impact life insurance sales.
Mr Kwok said: “Some CPF members who have purchased policies which are larger than expected, so they can’t fund the future premiums. Insurance companies are quite prepared to relook those policies and adjust it downwards to more realistic levels.”
He also expects to see some policy terminations this year because of the CPF cuts.